SF Apartment : January 2017

COURT TALK

The Big Chill

by Clifford Fried

Quinlan v. Paxton Court of Appeal of California, First Appellate District, Division Five
August 16, 2016 Opinion Filed
The defendant, a tenant, has lived in a Pacific Heights apartment since 1974. Due to a dispute with a prior owner, the defendant was given the right to control the color, style, and quality of any items replaced in the apartment. At the time the current landlord purchased the apartment complex, it was in need of extensive repairs. Before performing the work, the landlord received a letter from the tenant with detailed plans for remodeling the bathroom. The landlord rejected the tenant’s proposal, saying he was not required to make such a “drastic upgrade.”

Some time after, the tenant purchased a shower fixture and deducted the $1,600 cost from his rent; the landlord refused to install the fixture in the shower. After the refusal to install the fixture, the tenant reported the condition of his apartment to the San Francisco Department of Building Inspection, which then issued a notice of violation to the landlord requiring, among other things, replacement of the shower fixture within 30 days. After being unable to reach an agreement about the scope of work, the tenant filed a small claims suit seeking $7,500 in damages for failure to correct the violations. The tenant lost the case.

The landlord then received a final notice from the city, warning him that if the violations were not corrected, he would receive substantial penalties. The landlord attempted to repair the violation; however, the tenant refused to allow access to the unit. Because the final warning was not obeyed, the city scheduled enforcement hearings.

The landlord brought a suit against the tenant, claiming breach of contract and breach of the implied covenant of good faith and fair dealing. The action sought declaratory relief clarifying the parties’ rights and obligations under the lease, as well as preliminary and permanent injunctive relief to allow the landlord to correct the violation. The trial court issued an order allowing the landlord to perform the work before trial and ordering the tenant to stop obstructing repair efforts. The court also ruled that the tenant breached the lease agreement by withholding consent to the repairs by imposing unreasonable conditions.

The Appeals Court upheld the lower court. The main thrust of the appeal was that the landlord never fulfilled the condition precedent before obtaining the tenant’s consent. The Court rejected the appeal because there was substantial evidence that the tenant imposed unreasonable conditions on the repair work, which included monetary penalties and a quality of fixture.

Owners must consider all lease terms before purchasing a unit to determine the price of the property in order to mitigate costly litigation like the one in this case. If any lease provision appears unorthodox, consult with a lawyer.

Crasnick v. Marquez
Appellate Division, Superior Court of California, Los Angeles
May 24, 2016 Opinion Filed
In this case, the landlord filed an unlawful detainer action against his tenant for failure to pay rent. The tenant agreed to be represented by an attorney from public counsel, a pro bono law firm. The tenant agreed that public counsel would receive attorneys’ fees if the court awarded any. The trial court eventually granted the tenant’s motion for summary judgment and awarded $6,245 in attorneys’ fees. In subsequent eviction action against the same tenant, the landlord won and was awarded $6,377. The landlord filed a motion to offset his $6,377 award against the attorneys’ fees the court awarded to the tenant in the first case. The lower court refused.

The Court of Appeals was asked to decide which judgment had priority. The Court affirmed the lower court’s holding and held that the first judgment took priority, among other reasons, because of policy considerations. The Court held that lawyers would be less willing to represent indigent people if subsequent judgments could be used to offset their attorneys’ fees. The Court held that the result would go squarely against California’s policy of attempting to make legal representation to indigents as widely available as possible.

Landlords should be aware that a court can take into consideration public policy in determining awards. There are many times where a landlord loses the first eviction case, and then starts over and refiles. This case will make offsetting of money judgments more difficult. And since many tenants have no assets, offsetting awards is usually the best way for a landlord to collect on a judgment.

San Francisco Apartment Assn. v. City and County of San Francisco 
Court of Appeal of California, First Appellate District, Division Three
September 19, 2016, Opinion Filed
The San Francisco Board of Supervisors enacted Planning Code, Article 3, section 317, subdivision (e)(4) (“ordinance”). The ordinance required landlords who evicted tenants under the “no-fault” causes, including Ellis Act evictions, to wait ten years before being able to merge the withdrawn unit into one or more units. Soon after, SFAA (“plaintiff”) and others sought injunctive relief barring the city from enforcing the ordinance. The main thrust of the challenge to the ordinance was that it violated the Ellis Act, which preempted the ordinance.

The Ellis Act prohibits local governments from “compelling the owner of any residential real estate property to offer, or to continue to offer, accommodations in the property for rent or lease.” The plaintiff argued that the ordinance would force owners to rent their property. Otherwise, they would need to wait ten years before receiving a building permit to merge the withdrawn unit with another unit. The ordinance essentially penalized landlords for withdrawing rental units from the market. This is inconsistent with California state law, which prohibits local governments from passing this kind of ordinance.

The defendant had two main arguments: that SFAA had no standing to sue, and that the ordinance is not inconsistent with the Ellis Act. Although SFAA itself had not, and would not, be affected by the ordinance, its members would. The court held the plaintiff did have standing because courts have long recognized an association’s right-to-sue on behalf of its members. A court will allow an association to sue if one of its members could have brought the lawsuit themselves, the lawsuit is germane to the organization’s purpose, and the lawsuit did not require a member to participate. The court held the plaintiff did have standing because its members collectively owned 68,000 units. As soon as the ordinance passed, its members called the plaintiff to inquire how this would affect their property rights.

The Court also did not agree with the plaintiff’s argument that the ordinance did not conflict with the Ellis Act. The Court held the ordinance did in fact penalize property owners who left the San Francisco rental market for the purpose of merging a withdrawn rental unit. The Court held the ordinance punished property owners by penalizing them for exercising their right to exit the rental market. The punishment is in conflict with the Ellis Act.

Owners should be aware of what ordinances their elected representatives are passing, and also understand how a trade organization like SFAA can be a powerful ally in protecting property interests.

The information contained in this column is general in nature. Consult the advice of an attorney for any specific problem. Clifford Fried is with Fried & Williams, LLP and can be contacted at 415-421-0100. ©2016, Fried & Williams, LLP. All rights reserved.